U.S. Supreme Court
Grant v. A. B. Leach & Co., Inc., 280 U.S. 351 (1930)
Grant v. A. B. Leach & Co., Inc.
Argued April 11, 12, 1929
Decided January 6, 1930
280 U.S. 351
1. An allegation in a bill in a federal court, by a receiver, that the suit was brought by authority of the state court which appointed him is put in issue under the 30th Equity Rule by an allegation in the answer that the defendant has no knowledge or information as to the authority granted the plaintiff in that regard, and therefore neither admits nor denies the allegation, but requires the plaintiff to make strict proof thereof. P. 280 U. S. 357.
2. The Court of Common Pleas of Ohio appointed a receiver of all the property of a local corporation in two suits, (1) a suit by a mortgage trustee seeking to satisfy the company's defaulted bonds by foreclosure of the mortgage, and praying for a receiver to take chanroblesvirtualawlibrary
charge of and manage the company's property and to collect the rents and income therefrom and to sequester all amounts so received from any of the mortgaged property for payment of the bonds, and praying general relief, and (2) a suit by a preferred stockholder of the company against it and the mortgage trustee, alleging that, owing to market conditions and want of capital, the company had ceased operations and was unable to pay or finance its obligations, including the bonds, and would be subject to suits, judgments, executions and sale of its assets, and praying that, for the necessary protection of its bondholders, stockholders, and creditors, a receiver be appointed to take charge of and conserve its plant and property until its financial requirements could be provided, and for general relief. The court directed and empowered the receiver to take possession of the property and to do all things necessary to preserve and protect it for the best interests of all parties interested therein, and authorized him to bring suit in the federal court to recover certain of the bonds, or their value, from their holder, upon the ground that they had been obtained from the company under an ultra vires and illegal contract in exchange for some of its preferred stock. The claim was a chose in action of the company, and as such was part of the property embraced in the receivership.
(1) The Court of Common Pleas had chancery jurisdiction (§ 11894, Gen.Code of Ohio) to appoint the receiver, and even if it was erroneous to extend the receivership under the petition of the mortgage trustee to property not covered by the mortgage, and to grant any receivership under the petition of the stockholder, which prayed no other relief, the validity of the appointment could not be attacked collaterally in another court. P. 280 U. S. 358.
(2) The action against the bondholder, involving, in effect, the claim of an illegal taking of a large amount of the company's bonds which, if recovered, would reduce the amount of the mortgage lien was within the terms of § 11897, Gen.Code of Ohio, providing that,
"under the control of the court, the receiver may bring and defend actions in his own name, as receiver, . . . and generally do such acts respecting the property as the court authorizes."
P. 280 U. S. 360.
(3) In any case, the order specifically authorizing and directing the receiver to bring that action was one which the Court of Common Pleas had jurisdiction to make in the exercise of its discretion and under the construction which it placed upon the statute, and, even if erroneous, was not subject to collateral attack by the party sued under it in the federal court. P. 280 U. S. 360. chanroblesvirtualawlibrary
3. The rule that a chancery receiver, having no title, cannot maintain a suit in a foreign jurisdiction to recover demands or property therein situate held inapplicable to a suit in the district court by a receiver appointed by a state court having territorial jurisdiction within the division of the district in which the suit was brought. P. 280 U. S. 361.
4. When the circuit court of appeals erroneously reverses a decree of the district court in favor of a receiver and dismisses the suit, upon the ground that the plaintiff had no authority to sue, this Court, upon correcting the error, will remand the case for determination of the merits. P. 280 U. S. 363.
27 F 2d 201 reversed.
Certiorari, 278 U.S. 593, to review a decision of the circuit court of appeals which reversed a decree of the district court in favor of Grant, receiver, and dismissed the suit on the ground that he had no authority to sue.